Ep#13: Is Early-Stage VC Broken? The Future with Jeff Becker - Antler

Welcome to Startups Decoded, where we uncover what it really takes to build and scale startups. I'm Andy Walsh, founder and strategist. Each week we will bring you actionable insights and real stories. Let's dive in. Hello and welcome back to Startups Decoded. Today we're jumping back into venture capital and I've got a great guest in Jeff Becker, who is GP at Antler. Welcome to the show, Jeff.

Thanks for having me, Andy. I'm excited to be here.

This is my sweet spot. I love Early Stage and we'll talk more about Antler, but that's hustle as far as founders with good ideas just bursting to be able to get to market and start making money. It's very different to later stages, which is a lot of number crunching in the way that you look at it. So to kick off, I'd love to hear from yourself just a little bit about Antler.

Yeah, absolutely. Actually, I'll start with this topic. Since you opened up with Early Stage, I did a post maybe, I don't know, six months ago with Peter Walker from Carta. We looked at the average age of a company from incorporation to seed round and to priced rounds, seed and series A. And we came up with this idea of the hidden years of inception. And if you kind of look at the data, it suggests that the average company is anywhere from a year and a half to two and a half years old before they're doing their first true seed round and certainly before they do their first price series A, which can be as much as four, four and a half years. And so the question you have to ask yourself is like, what happens in those 12 to 24 months before a company is really getting backed by an institution? And the reality is there's a lot of time that people don't talk about, they talk about finding co founders, building products, shutting it down, finding customers and then firing them because they're not the right icp. It's this really kind of hairy, lonely journey, right? It's, it's just wrought with kind of disaster and kind of a personal need to drive things forward until you have something that is, let's call it problem market fit verified. You know, there's a problem that people will pay for and there's a real market for it. And what you've built kind of has, that has that trajectory. And so what Antler is trying to figure out is how do we provide a solution or product to the market that solves for those people where it's too early to back it as an institution, there's very little to underwrite. And you can sort of sidestep the loneliness of the journey by creating culture at day zero. That's where it starts. Antler is all about culture at day zero. Getting founders into the room together. Anywhere from 100 to 150 founders at a time in an office like New York or in Austin, Texas, or if you look around the world in the 27 cities where we operate, it could be in places like Singapore or Malaysia or in Germany or, you know, in Korea even. And what all these people have in common is that they're going through that part of the journey. These hidden years of inception where they want to meet co founders, they want to build product, they want to get traction, and then they want to get those introductions to those downstream funds. And unfortunately, there aren't a lot of institutions that are writing checks at that stage. So the way that we solve for that is by bringing people into this room, working with them for anywhere from one to two months or three months, depending where you are in the universe, in the world. And then we invest after we've worked with them. That's the big difference. We spend time with them, we execute with them, we learn if they can build, if they can sell, if they can attract talent, if they can attract investors or angels. And we talk to the customers and we really just get a sense of who the founders, because that's the thing that really won't change, right? Over the course of the company. The product will. Will go through pivots. It'll, you know, completely shift. And so if we can underwrite based on the person and on the human being, we feel like we can come in earlier than anybody else, which is both a good thing for founders to get out of those hidden years of inception quickly, as well as a good thing for the fund. Right. We can come in early. We can get access to these deals before others are willing to take a shot on them. So that's the premise. We do this, as I said, all over the world in 27 cities, we have, you know, just an enormous team, an enormous network of people, 145,000 founders that apply every year. And we whittle that down to just the most ambitious, most incredible individuals you can imagine. And that's what makes it really fun to build in the early days. And you're around people like that, working with people like that, finding your sixth gear. So we call it an inception fund for that reason.

Interesting. And it's very different than most early stage funds. And from A time perspective, I would assume that you're burning a lot of hours if you're spending that two to three months with founders before you invest. It's labor intensive, but I feel that at the early stage, and we were talking just before the show, as far as what you're buying into as an early stage investor, it's not a product market fit, it's probably not even launched yet. But you're investing into those two or three years that you described before of people doing all the things to get to a point where they feel confident to raise capital, or they've got revenue, momentum, whatever that looks like, I'd love to be able to sort of go into that a little bit. So when you're spending those two to three months and like, if they can sell, if they can build a product, how they adapt, like is there some kind of standard way that you do that or are you very much in the moment with them and then get a really good sense on the key things that you're looking for?

Yeah, let's start with the founders, because founders should be first in everything we do. Not every founder should be venture backed. Let's start with that. And if you're thinking about leaving your high paying job or you're thinking about chasing this idea, you actually want a place where you haven't taken venture capital money yet. You don't have the accountability and the investors and the oversight of that. And you're figuring out, do I build this adventure capital, Do I build this with acquisition capital? Do I build this as a bootstrap business? Do I build it with angels, Do I build it on my own or with others? And so you want this time with other people who have a similar level of ambition to you to even just figure out which path you should be on. So the thing that I always start with with the founders is we want everyone to be better for having spent time together. That may mean that you don't want to be venture backed. And if you figure that out, that's great, right? You figured out the right path to be on. And if it does mean you want to be venture backed, then we're here to do that and we're here to back you at the earliest stages. You can almost think about it like institutionalizing the friends and family route, getting to know these people as well as you would know someone you've worked with for 10 years at a company or someone you've known your whole life. But we supercharge that by being in person, in the office. So on the Investor side of things. Back to your question. You know, during the program, I'll be here, you know, seven or eight in the morning, until eight or ten at night, some days on the weekends, you know, trying to work with the founders in the same kind of intensity that they bring. So if you can help set the pace and again create that culture and that density, you can help really great people find that sixth gear. And while you're doing it, understand who they are, how they operate, what's driving them, how big their ambitions may be, how focused they are, can they build, can they sell? Do other people, other highly ambitious people want to work with them? And as you reflect on investing at this stage, you're often asking yourself, is this someone I would go work for? Is this someone who I want to work with for the next 10 years? You know, if you've been at any company really and you think about your past colleagues, there's usually a few standout people. You can point to them and say, I would give them my own money to go build something. I trust them, I believe in them, they're magical, whatever it is. But it's very rare that you describe those people with specificity on the one thing that they're most amazing at. They're usually amazing at a lot of things. A traditional investor may not get to see all of those dimensions of a human being. Right? You may get to see a pitch deck, you may get to see a few calls through an investment committee, for example, but you really don't get a chance to see are they here at midnight, you know, are they making progress every day, are they shipping product, are they shutting it down unemotionally for the betterment of the business, even though it's an emotional thing and a bunch of sunk time and energy that they're basically deleting when they wipe a code base. And so those are these things that are multivariable that allow you an experience with someone as a whole individual that can give you conviction on underwriting them. So obviously a lot of hours go into it, but it is this sort of tactile thing when you spend time with people to understand if they've got that magic, if they're in it for the right reasons, if they're giving it the right effort, if they're front loading their time and if they're making progress against the thing that they're working on. You know, some founders have this domain expertise where they know exactly what they're building, what they're going after. It's a, it's almost A linear path? Not quite, but it's almost linear, certainly relative to the others who are maybe chasing something they don't know as well. But action creates information. And so by building a product on day one, shipping it on day two, building something new on day three, and doing that repetitively for two months, you actually do see a lot of learnings amount in the form of trajectory. So I think both can be interesting cases. But we don't have a kind of a set archetype. We want to work with those people and see who has what it'll take.

Yeah, the personality type is interesting too. And if it's a solo founder versus co founders, and even the dynamic between co founders and how they sort of interact and iterate on what they're building can, for me, when I'm looking at it like if I'm going in and I do a few advisor roles, is, that's one of the first things I look at is, is culture fit and how I can relate to this person. Are they open to feedback, are they open to collaborate? How they connect with each other and, and what you're seeing, I would imagine, is people at their best, but also at their worst. And that's a fascinating thing too. And the founder journey is not pretty. It's, it's stressful and it can be tough. So it's, it's how resilient someone is in the sense of when they're at the load, can they be pragmatic, identify a problem, find a solution and be solution focused. And I'd say that the ones that I've seen be successful across the board. Just reading case studies to people that I know is that, that resilience and being solution focused is something that is a common trait, I think, of successful founders, for sure.

Sam Altman did this interview. You know, he's obviously the former president of YC in this interview where they talked about a test they did, they funded 20 insanely smart people with incredible backgrounds that did not have any ideas. And the outcome of that was essentially zero success. Like none of them built something meaningful. And the reflection on that that he gave was that founders need to be solution oriented, they need to be creator. Exactly what you were saying. Because what ends up happening is not only do you need to come up with tons of ideas every single day, but as you get bigger and bigger, your team starts to solve the easiest problems. Right. And so the things that make it to you as the founder are both the most important things and the hardest things, as well as the things that no one else can solve. And so if you're solution oriented, if you don't really care about the nose, if you don't care about the walls that are put up in front of you and you can figure out how do I get around them or over them or through them, you end up being this very resilient sort of autodidact, very creative, you know, endless source of positive energy for the company. You're right. Like if you can spend time with people in person, you can understand are you solution oriented. When you come up against, you know, something where it's a, it feels like a wall of no's or an impossible thing to go through or around, you can see there are some people that just, they don't see that as a, as a obstacle or a hard stop. They see that as an opportunity to figure out something that no one else has figured out. And once they're on the other side of that wall, it becomes part of almost a differentiation or the value proposition or you know, in some sense the moat. Right. Like they've gone further than other people could have gone, would have gone, will go. And so they continue to stack progress and create a separation between them and others because of that solution oriented perspective. And it comes back to creativity, it comes back to resilience. You know, it just comes back to hard work and tenacity. End of the day.

And I've been into your office and there's definitely a lot of energy. I would describe as far as the people that are working there using your space to be able to get to that next point. And I just recently had Joel Conley on, who's creative director of Blackbird, huge VC out of Australia. I've got about 7 billion AUM, had huge success with Canva, but his first role was community. And their approach to that was rather than be platform focused and provide services, what they did was help build out the ecosystem by connecting founders together and helping build a large network that almost had a pipeline of talent, resource, experience and other founders meeting other founders, I was sort of that. That connection I assume is happening just natively and organically within your office.

Yeah, there's a quasi dilution experience or sorry, dilute dilution, quasi delusional experience. RA founders that they're like, I need to be in San Francisco to build a company. The reason I think it's quasi delusional is because the short answer is if you are there, you are exposed to this culture that is all about tech. You leave your apartment, you're around tech people, you go to the office, you're around tech people, you go into a coffee shop, there's an investor. The access to capital and to people and to the energy is unmatched. And so the question is, if you're not there, what does it look like? How do you do it? If you're in Australia, for example, you know, that's an amazing fund that you mentioned. You want to try to replicate and create those things in other cities around the world. And I think that's a lot of funds have lacked is because it's a servicing business, it's, it's operationally intensive, intensive to do that. And so how do you create an experience for founders where they're always around others who are sort of delusional that they're going to build the craziest, best thing that's ever existed on this planet? And at least I can speak for Antler in New York, where I'm based, right? We are, we have 140 founders here working day and night. If you go up one floor, there's a couple of portfolio companies that took office space. If you go up to the 11th floor, there's companies with office space. Other floors throughout the building have venture capital firms here. So if you ride the elevator, the, it reduces that sort of diluted experience of being in a city that's not San Francisco. Right. So you're just compounding the relationships, compounding the work ethic, compounding the belief in yourself that it is possible other people are chasing it. And I think that's really important because, you know, I can't speak for everybody, but I know that when I, I was at LinkedIn for nine years and when I left that experience having done nine jobs over nine years there and having this kind of hyper growth experience by virtue of product market fit, essentially the business growing and being in a vacuum in terms of opportunity, you leave that and you say, I don't want to have left that to not accomplish something even better. And to do that you've got to overweight your effort and your inputs. And if you're in an environment where you're not around other founders that are similarly ambitious or you're not around capital or you're not around the sort of energy that's required to build something of meaning it's very hard. I mean, startups have this natural entropy, right? Like they're always going to zero unless you are pushing the ball forward. And it's just much easier to do that when you're in that environment. And so I think we're going to have to see these other cities around the world, places like Australia, places like New York, really invest in culture, really invest in community and really create that experience that the best founders have a home. And so that the founders that are taking that chance, leaving that big tech job or you know, leading this, you know, amazing career that they're already on, have a place to go and actually find their sixth gear. Like Mark Laurie, you know the guy that started Diapers and Jet and now Wonder just acquired grubhub. He talks about this idea of your sixth gear and it's just so many people have it and never find it because they're not around it. They don't know what that pace is and what the bar is. And so if you can create an environment like that, I think that's really beneficial to the community, both for helping people get on the right path, but also get off the path if it's not for them. So that's kind of my approach to it. I think you called it out correctly. A lot of these little pieces mount on each other and over time create a lot of, a lot of results.

And that kind of environment normalizes a lot of things for you. And you see a lot of people on LinkedIn that are sort of probably moved past into the revenue generation phase and they're talking about the two, three years that they basically had no life. They spent their last dollar to get to a point there, but it feels like they just came out of nowhere and that it was like this moment, all of a sudden they just became a rocket ship with nothing going behind it. And I think for people to see the hustle, the energy, the stress, the challenges, et cetera, it's confronting if you've never been part of it, if you're a first time founder. So I feel like having your team's expertise, but then also like other co founders around them is a really great way to level set like you touched on there.

Yeah, you want to, you want to compete, you want to like keep finding that next level. And you know, you could look at any example of anyone doing anything like truly great, like Kobe Bryant for example, he talks about his, you know, three workouts at a day and he's, you know, working out at 3, 4 in the morning. His 4am workouts that he's famous for, it doesn't make a big difference. Over week one, you know, you only stack maybe five, six, seven more workouts than your peers. But over two weeks and two months and two years and 20 years, there's this massive separation in how you are able to compound your results. And Alfred Lynn actually has a nice graph that he shares with his team and talks about, you know, what is it like to work 5 days, 6 days, 7 days and how that mounts over time. I think the approach is the same, right? If you want to be an Olympic athlete, if you want to be the best, you know, founder in the world, it's a full body experience. It's all in. It's, you know, really how can I go and do this thing? That's not to say you can't live an amazing life building companies and doing them in another fashion or in another venue or another way. But your definition of success if it is Airbnb and Uber. I've yet to meet someone that's built something like that where that wasn't their experience in the beginning of really front loading their time of really kind of compounding, get it? Cultural habits and, and kind of corporate work ethic that is required to do something like that.

And you always hear those famous stories of the early days of Airbnb. And DoorDash is another great one where the founders are actually out on bikes delivering food themselves from those first parts. And they're the things that people forget about. They see the IPO or the exit and the multibillion dollar check and it's like they all started the same place. It might seem like it's a billion dollar business that came from nowhere, but that first period is tough. And I think the piece that I work with on young founders too, and I'm curious about this, is how do they prioritize the right things? And the rhetoric right now is a lot of conversation around bootstrapping. And in the age where you can get a product to market super cheap, super effective and get indications of product solution fit pretty quickly and either kill it instantly rather than spending years developing this really shiny product knowing that you can compete. So the removal of the moat in that instance changes the game completely.

It's really interesting. There's like this dichotomy adventure we're seeing right now where you have the seed strapping. We're hearing this a lot, which is feed round is the last round you'll ever need. It's more efficient to build than ever. Every department is AI native. But then you're also seeing the other side of it, which is these. You see that graph? It's like fastest companies to 100 million, right? Like Wiz is in deal and Mercour is on that path and midjourney and a bunch of these other Companies, but what they don't tell you is that from zero to a hundred million, it's not from incorporation. Usually it's from like the first time they sold something. So there's all these hidden years of like hacking on something, working on it on the side, figuring something out. I would be curious to see that, that same graph done from incorporation, not from first sale. I think founders have sort of like an incentive to make it seem faster and like there's more momentum so they can create FOMO and raise more capital and grow really fast. But I do think we're seeing both. We're seeing, we've always seen that in venture capital, right? The dichotomy of lip scaling versus sort of durable building, you know, a trade desk, for example, and Eric Paley's famous for this investment. $7 million, never raised again. Exited IPO for 40 billion, really built something durable. Even though they were incumbents. You have cases like Figma that took four or five years to get to market and. Or cases like Bubble that, you know, similarly were really product focused and not so much, you know, raise tons and tons and tons of money and scale it up the way Uber did, for example. I always. There's like a fun little fact. I like that it costs more money to put people in cars than it did to put people in space. Uber raised something like 12 billion and SpaceX raised something like 8 or 9 billion. It's interesting to see those differences in how people build. I don't think there's one that's right or wrong, but I do think that there's value in durability, right? There's value in sort of compounding good product and having a high bar and going slow to go fast. And there's certainly value in going fast to go fast. But it's gotta be right for the team and the culture and the founder and the way they operate and make decisions. Knowing that about yourself and how you operate will influence who you hire. It'll also influence who you raise money from and what sort of culture do you have on your cap table. And so I think we hear a lot of like the hustle culture. Work as hard as you can possibly work, but there's also this other side of it which is do that, but do it in a way that is durable and creates value. And it may feel slow, but over time it's like this hardened core of a business that is unbreakable because they spent so much time to make it as amazing as it could possibly be with the most amazing people. So there's cases across the board. I mean, Airbnb took 15 years to get where, you know, where it's going. IPO was, you know, these are long term games. And I think, you know, both can be true. But the bar is still very high for the quality of work, the quality of people, quality of capital.

And I love listening to Brian at Airbnb talk about that. He's so open and talks a lot about those, those early stages and challenges and the pandemic and all the things that go through that business. I'm curious, like I look at today is a little bit like dot com, right? There were these companies that came out, big checks were getting written, people were making revenue quickly, but they were building the market at the same time they were building the product. And I see it today, right. There's a lot of tech businesses that are using AI as a tool to whatever it is, primarily effectiveness at the moment. Quite often they're creating the category and not just a product. So you have to be in market educating on people, not just why they should buy you, but what your business vertical actually is. Are you seeing something similar where sales is a longer sales cycle because you need a lot of education?

Yeah. Well, I don't know if this is exactly to the point you're making, but there's something I'm seeing right now which is I call them like confused founders, confused venture capitalists, where there's a bunch of businesses that when they're built, AI native have much higher margins and so they appear venture backable and so. And there will be many of these, right? AI native accounting firms, you know, other services like businesses, almost like tech enabled business process outsourcing, if you will. And there's companies that are absolutely dominating in this vein, like an invisible technologies, for example. Right. But I think that there's also a whole set of people that should be building these kind of businesses with acquisition capital, not venture capital, where you can go acquire a CPA or you can go acquire, you name the business that is sort of like low margin, high relationship kind of has traditionally been very manual. And you start to implement AI into it. And so you can grow through acquisition in that way. And I think we'll see a lot more of that and we'll see some overlaps in venture capital where people will take bets on whether or not that can be a venture scale business. And so we are seeing a lot of these like AI native businesses that kind of span the gamut, some that have the kind of the founder mentality of interscale and others that have the, let's call it durability, like buy an EBITDA positive business, improve the financial statements, acquire a second and a third and a fourth, outsource the things that you can create AI around the things that you can and actually scale it up that way. I think those will be interesting businesses. I think some will be durable and never have raised any venture money and be really amazing outcomes for the people involved. And I think there will be a few that also build the venture version of that. But there is this like interesting thing that's happening right now where the lines are bleeding across those two and we're.

In a world where we've got information overflow, right? There's more people than ever on LinkedIn. Good example. Where you were before sharing insights to their own experience. You know, anything like medium substack. There's so many platforms where you can get really interesting information and people share a lot. So what that does is lift the knowledge base of everyone concurrently. If you're savvy, you can look at those things and look at someone else's experience to be able to benefit you and take shortcuts. But also what it means though is that they become these little trends that people jump into. And what I've, you know, one of the big ones in the last 12 months has been around dilution and where there's been like half a billion dollar exits and the founders got nothing and all these stories that come out and it's changes people's perception and they'll jump on and go, well, I actually don't need to get fundraising now because it's going to cause me problems in the future and making these quick decisions. And do you see that happen where they buy into trends without even having any experience?

Yeah, I think that's true. And you're also seeing it. The Carta data will lag back a quarter or two whenever the rounds are reported. But I think we'll see in the numbers that the seed rounds that are happening, those investors have been waiting a little bit and they've been doing much bigger seed rounds. So instead of these, you saw this in 2021, everything was like a 2 in 20, you know, or like a, you know, 3 and 30 or 4 and 20, whatever the numbers were. 10 to 20% dilution on a pitch deck and they were like yoloing checks into stuff. I think those same investors have gotten a lot more disciplined on looking for durability and trashing and the outcome has been because the revenue is higher, the rounds are actually bigger. And so you see this when you see those trend lines on valuations and size of rounds, they've been very resistant. And I think the reason for that is because the ones that are being reported, we're seeing five, six, seven, $8 million seed rounds instead of these two or $3 million seed rounds. But that's really a function of people realizing that these companies can get to revenue more quickly and trying to wait to see the winner emerge a little bit. You'll have 10 companies building something very similar. And so instead of just going in on the excitement and kind of the, let's call it the lack of governance or underwriting that we saw in 2021, instead of that collectively, the venture capital industry at traditional early stage called seed round are seeing so much revenue from these companies because of how efficient they are that they're actually moving the bar and making the bar a bit higher. You know, Steve, investors coming in at 500k, 700k in ARR as opposed to on a pitch deck. So it leaves this gap in the market for true precip institutions, for true early stage investors that are willing to take bets and back founders. But I think you're right ultimately that like building these businesses is more efficient. What that means for the founders and how they raise and who they raise from is evolving slightly and founders need to stay on top of that. But you know, I think that it's a, it's a healthy thing overall to have venture capitalists being more discerning and also having founders being more effective with the capital they are raising. So net net. I think it's a good thing. But it's been an interesting time.

Yeah. And it's definitely a byproduct of 2020, 2021, where to your point there was a lot of big checks being written at will sort of with no, not like they weren't doing due diligence, but it seemed to be a little bit more carefree with the approach. And that's had a recalibration that's happened recently. And I'm sure the pitchbook data that I read in from 2024 was that from 23 to 24 there were. The average check size went up, but the number of deals that were written went down. So to your point. So people were being more particular on where they put their money because of what had happened in the market in the years prior to.

Yeah, it's another reason I like operating at this stage. Being an inception stage investor is actually inherently countercyclical. So when you have hype cycles like in 2020 and 2021. Like Take Crypto, for example. You know, there's so much momentum in these rounds. The valuations were getting driven up, excitement was getting driven up. That brought a bunch of tourist founders into venture capital. Oh, it's easy to raise. I can go do this crazy thing. I can actually pay myself on day one. It's not a good thing. You don't want people who aren't there for the right reasons. And you also don't want these crazy valuations. You can't grow into it. But being at an inception stage investor, maybe we weren't getting into the hottest crypto deals in 2020 and 2021, but in 2022 I had crypto investors coming, crypto founders rather, coming to me saying, this is what I want to build and no one's backing it. And so you end up with this inherently countercyclical investment philosophy, which is we're investing in a future that seems too far away for people or something that doesn't seem realistic or reasonable. And that's where you get interesting. Asymmetric access, asymmetric information. I'll give you two examples of a couple antler portfolio companies, one being Amino Chain. We backed that company in 2022. Casper, if you spend any time with him, is very obviously an outlier. He's an outlier in many dimensions as well. And we can go into that. But the truth is he was building something on the blockchain in a market that is hard to sell into in healthcare. And people sort of looked at us like we were crazy. But if you spend time with the individual, with the team, you see what they build and the progress they make, it's very clear that they are going to build something of meaning. And in 2023, 2024, as they continue to make progress and refuse to give up, they did something no one's ever done before and they built a biobank and it's powered by blockchain. And you'd ask yourself, why does it need to be powered by blockchain? But the reasons are very durable and credible reasons. When you transact patient data, it should be obfuscated and it should work around hipaa, for example. You can do that with a zero knowledge data lake and architecture. When you transfer things like stem cells and blood and other sort of tissues and organs, you have a material transfer agreement. You have to transfer those materials between a biobank and a research institution. That requires legalese. And a smart contract is actually a great way to do that. You also have things that you'd want to do in healthcare if you could, like pay royalty payments. Imagine someone you know or someone who's going through something terrible, call it cancer or something similar, they get approached by someone to participate in a study. And historically it's been very difficult to get these people to participate, particularly underrepresented groups. But now imagine that same person gets approached and by participating in it, there may be a royalty for donating that specimen, the biomaterial. It can offset the cost of care, for example. There's all these reasons why you may want to treat data inside of a BioBank like an NFT. But when the language being used was turning away a lot of investors, it was very hard to raise. But if you looked under the hood, you would see that it was very durable. And now, you know, they're backed by andreess, they're doing an amazing job, team is growing, they are going to hopefully be, you know, the default biobank in the world, like a Amazon.com for places like Harvard and Roche and Pfizer to search for and procure biomaterials that will contribute to the advancement of science, you know. And similarly, in 23, we backed a company called hi Fi Bridge. They're doing stablecoin rails, using APIs to help other companies transact money across different currencies in different countries. And at the time, you know, no one was really backing these things. And now you see stablecoin everywhere in the media. Stripe has a strategy acquired Bridge for a billion on $12 million of revenue. You know, this is another company that's absolutely flying, you know, just growing at an unbelievable clip. And I take that back to this idea of backing people, not products at inception. I take it back to this idea that inception is countercyclical inherently. So as the AI run up is happening, we'll see a lot of AI companies, but to me it's more about are they AI native builders or are they joining the hype cycle? Right, if they're joining the hype cycle, it's the wrong reasons. But if they're AI native builders and their sales team and their customer success team and the way they're building their product is AI native, it's a much more efficient way to create that traction revenue and kind of compounding profitability that allows them to reinvest in the business. Really efficient.

And I love the Mike Maples book Pattern breakers. And he, he talks a lot about what you're describing there as far as ability for someone to see around the corner.

He's really amazing.

It's fascinating to listen to. He was on the Venture Unlocked podcast with Samir Kaji and it was just really insightful to look at the things that he sees in people who just see the world through a different lens. And that's what you're describing there as someone's like, look at the future state, what's it going to look like with technology shifts and you're having to use a little bit of like common sense, but you're also having to be a little bit of a futurist and go like, what's going to change in society, what technology will change? And be able to forecast that. And you have to be able to identify that you need to be able to be on that journey with them. And quite often how they articulate their vision and what that future looks like doesn't always translate. So you spending time with them, I assume you're able to get under the hood and see that for yourself.

Yeah, no, for sure. I think you can really understand the durability or the first principles of why someone is building the way they are. When you spend time and you pressure test and you push and I push back on the blockchain thing with amino chain, right. Does it really need to be on the blockchain? And as you get these answers, you start to understand not just like what the outcome of the decision the founder is making, but why they're making that decision. And at least for me, I'm looking for people that are unemotional about those decisions. A lot of people build products and you hear like, oh, the all in one platform per X, they feel like more is better. And as they've built out this like Frankenstein product, they struggle to delete code, they struggle to simplify and they get lost in the customer feedback. You know, they get lost in this idea of, you know, is this thing the magical part of my product or not? But there's certain founders to what you're saying here about really understanding how they make decisions is figuring out if they are optimizing for what they've already built and the time they spend and kind of the sunk cost fallacy, or if they're optimizing for the system of the company. So we think about this like system subsystem, are they optimizing for the betterment of the company? Are they optimizing for progress, for speed, for traction, for durability? Or are they sort of operating a subsystem level of change this button, change this thing, add this thing, add this feature and they Keep doing this. And even though it feels fast in the moment, because it's such a busy and chaotic way to work, it's really not creating that sort of really, really hard, hardened core of a business that is valuable to the customer.

Yeah. And my first business in 2012, I was a victim of just feeling that I had to keep working, not really understanding the consequence of the impact that those things that I were doing had sort of short and longer term. And then as we went through, we got much smarter at understanding buying cycles, pricing, ICPs, all the things that allow you to be more nimble. But you have to be really, I guess, open minded and prepared to fail to a certain degree. And, but understand what failure means. It's like putting a plan. This is our hypothesis, this is what we want to test and it's going to go one of two ways. And that ability to be pragmatic at that point and not get upset, as you said, and sort of just roll with it and go, okay, that didn't work. And then you can just keep exploring that. Right. And that's where you have to be at in that early stage. So I assume that's a common pattern that you're looking for in founders.

For sure. There's people conflate speed and trajectory when those things should be bifurcated. Speed is how, how fast am I working, how hard am I working. But if there's no direction to that speed, if there's no trajectory or there's no vector, that person's not really going in the right direction. The rocket is not on the right trajectory. Right. And so when you think about this, they may be working hard and fast and making progress, but are they making progress at circling the drain or are they making progress at, you know, launching a rocket towards, you know, Mars or something? And that's I think, a key difference of hard work and progress. Right. Of speed and momentum. There's these things that get really conflated and I think you can try to pull those things apart and figure out are they moving fast and working hard in the right direction on the right trajectory versus just working hard for working hard sake.

I forget whose theory it is now, but I love it. Which is that percent of your work drives 80% of the outcome.

Pareto principal.

Yeah, yeah, correct. And it's those kind of things. Sounds academic if you talk to a founder, but it allows you to have them really think about what are the things that they need to get done and then making sure they're hitting those priorities.

Yeah, exactly.

So touching on Fundraising. I'm really curious because in the modern world of investment, pre seed and even seed, some of these are new categories. Like in the world of venture capital, people kept on going further back and further back and people have changed their thesis around that. But for you, your role in very early stage companies that are pre revenue, what do you do as far as, like follow on strategies? As far as reinvestment, rolling capital, what does your strategy look like as a fund there?

Yeah, there's a few things. I think first off, as a fund, you want to first reduce the bad checks. As an exception fund, what I mean by that is if you can work with people before you invest, you can very clearly start to understand and articulate who should not be receiving your money, right? So folks that may have gotten your money on the basis of their background or the idea or the market that they're building in, you can bring those people in and work with them. And if you can understand that they don't really have what it takes, you can start to reduce those bad checks. Almost no fund that I know of, I mean, I can maybe think of one or two at this stage like True Inception that are doing that. Right. Most of them are spreading bets across a series of companies on a semblance of short interviews or pitch deck that they receive or a referral from their network. And they're hoping that by virtue of having enough diversification, they're going to reach the kind of returns that their LPs want to see. I think if you can add in the reducing of the bad checks, you can densify the talent and the quality of the portfolio. Again, I'm talking specifically about inception stage. At seed funds and series A funds, you can certainly sit back and wait a few months and watch execution. But at the true, true low stage, there's not very many that do that. So first, to have performance and to make sure you're doing a job, you got to reduce the bad checks. From there, you've got to give founders enough money so they can build and start to make progress. You got to be able to burn something like 20 to 30 thousand dollars a month so you can hire the right team, you know, hopefully have a co founder. I think two teams, two people are better than one in my opinion. But that doesn't mean that's always the case. We have some amazing solo founder teams, but you got to give enough money to build and start to move on that path of gaining momentum. And then the other thing that you sort of alluded to is how do you follow into these companies to both help them be more successful as well as create great returns in the portfolio. The thing that we're starting to roll out here, which is new, is called the Agreement for Rolling Capital. What the Agreement for Rolling Capital says is we're going to give you more money than the original $20,000 a month that you're going to go burn. But we're only going to do so on the basis of raising additional external capital, and we're going to match that capital. And the reason that we're doing it that way is twofold. The first is you got to help the founders. In this market where it's hard to fundraise and speed investors, we're looking for more traction. You want to catalyze those rounds. You want to be able to go into that round with some money already committed to it. You also want to catalyze strategic angels and other people that can help your business grow. And so by matching 50% of whatever our founders raise up to an additional $300,000, they're bringing in amazing CEOs, amazing executives, ex founders, people that can really be beneficial to the founder journey, whether that's advice and mentorship, or whether that's distribution, or whether that's the network that they bring with them to help them find customers and investors. So first and foremost, it's really founder focused. We before the Agreement for rolling capital, about 40% of our founders would raise capital outside of antler within six months. Now it's 72%. Right. So we've almost doubled the amount of companies that are able to raise additional capital just by virtue of having this catalyzing force in the way that we invest. The second reason we do it that way is for fund performance. Right. We start with an 8% ownership target, very similar to accelerators and other folks that call themselves very early stage investors. But by having this Agreement for Rolling Capital, we actually give the portfolio a chance to grow our ownership in the best companies. So as they evolve and grow, we also grow our ownership systematically from 8% to 9, 10, 11%, roughly. And I think that's really important for our LPs, because what you want as an investment vehicle is something similar to the S&P 500. You want to rebalance towards the winners and you want to do it systematically when emotional decisions don't benefit you. Right. And so to be able to not have any LP capital at risk in the market, meaning, you know, the $300,000 being fully wired to the founder, but only wired when there's external Validation. And when there's progress being made, what it allows you to do is increase your ownership in the best ones, like the S&P 500. If you owned it for 30 years, you owned Nvidia, Netflix, Apple, Microsoft. You owned all those companies from the moment they were the 500th position, all the way as they rose up into, you know, 1, 2, 3, 4 and 5. But I think if you can do that in a venture fund, it'd be really incredible for the IRRs and for the performance. But traditionally, you can't do that because a super pro rata is, it's like a negative term, it's like a dirty word in venture capital. This kind of investing structure wouldn't work at seed in Series A because you'd be crowding out future investors, you'd be crowding out downstream funds. And so if you really look at the stage you're operating at, in our case inception, there's this gap, those hidden years of inception we originally talked about, where a product like this is actually perfect for founders and it's perfect for LPs. When you can marry those two things where it's beneficial to both sides, I think you get a really virtuous cycle that can unlock. So that's what we're seeing now. You know, these 72% of companies that are raising, they're raising for amazing funds like, you know, Andreessen Crow, all kinds of folks are coming into our deals now. And I think that that is a huge benefit to founders that are this early. It's erasing a year or two of their journey so they can get to where they're going faster. But it's a, it's a new model. And so, you know, we're still about a year into it. And the early data says it's going to be great, but we'll see how it plays out over the long term. My hope is that that extra 2 or 3% ownership that we get systematically in the best ones will result in 1 or 2% at exit and so on. Your biggest companies, your 10 billion company that you find, if you do own that extra 2% at exit, it's 200 million of returns for LPs, and hopefully it's shrunk a year or two out of the journey for the founder. And so hopefully, you know, we'll see that play out in retrospect and we can look back at this interview and like, yeah, you know, that was the hypothesis. Hopefully we're right.

Nice. And, and that's a huge increase as far as the follow on funding piece and how much money your founders are getting in additional rounds. And it speaks volumes to your success in how you're assessing those companies too, because you're only on fund one. So to be doing what you're doing is very much outside what most traditional VCs are doing. So your thesis is unique, but it's obviously being validated by a range of other VC funds as well in that process because they are picking up and adopting your portfolio companies at a high rate.

Yeah, I think that's right. And I think as a founder, when you look at where to start your journey, you want to reduce as much risk as possible. Right. So one risk is I'm not, I don't have access to capital or talent. That's why a lot of people move to San Francisco. Right. And I think if you look at the funds that you can start with at the Ingles, you can start with who's going to help you de risk it, who's going to, you know, three out of four times, get me to a seed round, you know, increase your chances from what traditionally is very, very low. You know, people that attempt it, that the hundred thousand people that are trying each year down to the 20,000 that have some kind of backing, and then from there only about 30 to 40% make it to a price seed. You know, you're talking about a very small percentage of people that get to that price seed round from the folks that originally kind of set on that path and incorporate. And so, you know, you pick a fund like Antler, you say, okay, if I can get through this residency, not only will I have a hardened culture and I'll be around great people, but if they invest, I've got a, you know, 75% chance of getting to my, my seed round. That's a community risking factor. If I can find a co founder there, it de risks me further. If I can be in an office that I don't have to pay for and be around people that are building till 2am Those habits can stack. And if you think about like all of the elements of company building, there's so many things to optimize. I had someone tell me once, everything is as hard as everything else. If you care about it enough, right, you can be building socks, you can, you know, a sock company, for example, there's still endless things to get right, from pricing to packaging to, you know, supply chain to the technology to the web experience. Doesn't matter. You know, you could be sending rockets to space. There's still an Infinite number of things to always optimize for. And so we try to approach the venture fund the same way. And one of those is Follow on Capital, one of those is culture, one of those is co founder matching and the list goes on and on and on. So hopefully over 20 or 30 years doing this, we will just continue to optimize every little piece to the benefit of the founders and to the LPs along the way.

Great insights and I think most of my audience are founders, so things to digest there. And I hope folks really tune into what you just said because it's really important and just finish up today. Jeff, I hate to end conversations, they're always so rich, but if you're a founder and you're looking to get into an Outlook program, what does that process look like?

Yeah, we do a weekly ama. So even if you're not sure what you're going to build yet, you can just attend an ama. They happen every Wednesday or Thursday. You can sign up for those on Luma and you can just listen to the partners and hear about the program and, you know, maybe you're not building today, but thinking about it in the next year or two, just great to come to those things and attend those sessions. You can also go to the website Antler Co. You just apply to a residency. Like I said, they're happening in over 20 cities around the world at all times. So whether your listeners are, you know, here in the US and we're doing it twice a year in March and then again over the summer, or if you're, you know, abroad somewhere else, there will likely be a program for you to apply to. I would submit the application. It's. It's pretty simple. We'll look at LinkedIn resumes, we'll ask you to input some information about your background, how ambitious you might be, what you might be working on, where your domain expertise may lie. We'll try to uncover if you have a bias toward action, if you're really taking the actions required to go build this thing, or if you're just looking for kind of startup school. Right. That's not the kind of person we're looking for. We're not trying to teach people how to build companies. We're trying to give them the place where they can go to do the best work of their lives and figure it out along the way with great people. And so, yeah, just applying on the website, attending the AMAs. And then of course, if you have a referral, if you know someone who's been through Antler or you have a connection to one of the investors. I always think that's the best way to to get a warm introduction and have a great conversation or just to network aggressively and build out your kind of your tribe and ask them for help.

Perfect. And I'll put some details in show notes of the podcast and when I post the content on LinkedIn I'll share some links there as well. But Jeff, you've been so generous with your time today. I appreciate you making this time to sit and share your insights on Antler.

Yeah, thanks Andy. I appreciate it. It's always great to have these conversations. I appreciate you sharing more about Antler and going deep on what it takes to build an inception.

Perfect. Okay. Thank you for listening. You're on Startups Decoded Follow Share with your friends please. Five star ratings. It helps me keep going. I'm going to be back next week with a new guest. Thanks again for taking a listen.